Government proposals to cap care home funding costs may not be as simple as they look.Posted on:
Will new government proposals – designed to help with nursing care costs – really protect the value of your home?
Care Home Funding Advocates is following the story.
Perversely, the range of measures announced last week will mean many elderly home owners end up leaving smaller inheritances to their children.
Announcing a new £75,000 cap on care costs, the Health Secretary, Jeremy Hunt, said this would end the “scandal” of elderly home owners being forced to sell their home to meet nursing care fees. As well as this new cap, the Government plans to raise the threshold at which people qualify for help with these costs.
These proposals state that people will only be deemed “self-funders” if they have assets of more than £123,000. Currently, those with assets of £23,250 or more – and in many cases this will include the value of their home – are expected to pay care bills in full. Given the average cost of a residential home is now £580 a week – and more than £700 a week for a nursing home – it is not hard to see how people’s assets are quickly exhausted if they spend their last few years in care.
But what is given with one hand is taken away with the other. The Government has said it will not raise the threshold at which people pay inheritance tax (£325,000) until 2019; at which point it will have been frozen for a decade – rather than raising it to £1m, as George Osborne proposed in opposition.
On the face of it, this looks as though those who are fortunate enough not to need care are subsidising the minority who do. (According to Age UK, just 16pc of those aged 85 or over will need to go into a care home, although this figure is likely to rise exponentially over the next few decades.)
But this is not the case. Insurance experts calculate that many of those who will need care won’t see any significant reduction in costs, although it will provide some backstop for the minority who have both substantial assets and will spend years in care. At the same time, more of those lower down the income scale will be dragged into the IHT net.
Chris Horlick of Partnership, a specialist annuity provider, said: “People should not be lulled into a false sense of security and assume that these proposals mean their maximum care bill will be £75,000, and the rest can be ring-fenced for their family.”
There are three major issues, he said. The most obvious is that this cap will only cover social care costs, so even when you have spent £75,000 on care fees, individuals will still be liable for future board and lodging costs, which can often account for a sizeable chunk of the total fees. Most nursing homes don’t split out these costs, but anecdotal evidence suggests that on a £600-a-week nursing home bill, as much as £400 could be “hotel” costs. So even if this cap is reached, many families will still face steep care costs.
Another problem is that the cost of care is based on the notional amount a local authority would pay if it was responsible to meet bills in full. As Age UK pointed out, there is often a significant gap between the rate paid by local authorities and the actual cost of care in many regions. Typically, a local council will pay just £480 a week, more than £100 a week less a year than the average care home fee. Many people will want to secure a higher level of care and comfort than that provided by the “average” nursing home, so could face even larger costs.
The new £123,000 threshold may also not be as generous as it sounds: remember this will still include the value of your home (provided there is no mortgage on it). With the average house price now at £242,000, according to the ONS, this £100,000 increase may make little difference, as the average home owner is still likely to be a self-funder. Currently more than one in two care home residents pay some or all of their care costs.
Even those with assets worth less than £123,000 will have to pay part of the cost; the local authority will only cover the bill in full when your assets are depleted to £17,000.
These proposals aren’t scheduled tocome into effect until after the next election. A change of government or a worsening of the financial situation could see these goalposts moved again.
These new rules are unlikely to be retrospective, so the costs of care now, whether in your own home or in a residential setting, are unlikely to count towards this “cap”.
If a family member needs care now, or is likely to in the near future, there are several steps that families should take.
The first is to request an assessment by the local authority. Before they make any financial assessment, councils have a duty to assess an individual’s social and medical needs. The council then estimates what it would pay for this care, before a financial assessment is made to determine how much individuals have to contribute. But many people who know their assets are well above this means test don’t have the medical assessment, so may not realise they qualify for other benefits such as attendance allowance or a contribution towards nursing care costs.
This assessment should also identify if you qualify for continuing care, which means care costs are covered in full by the NHS rather than means-tested by the local authority. Very few people qualify for this, but you can ask for a reassessment if a relative’s health deteriorates.
Care Home Funding Advocates can support families in identifying whether or not they are eligible.